PPP loan program accidentally paid some small-business owners twice

“Everyone is just flying by the seat of their pants," said one small-business owner.
Image: FILES-US-HEALTH-VIRUS-ECONOMY-UNEMPLOYMENT
One small-business owner told NBC New he has yet to receive a PPP loan he applied for in April, even after resubmitting his application form multiple times and exchanging dozens of emails with a senior vice president at his bank. Johannes Eisele / AFP - Getty Images file

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By Ben Popken

While many small-business owners complained of missing out on crucial funding from the Paycheck Protection Program, others mistakenly ended up receiving their money twice — or multiple times.

The issue stems from the hectic early weeks of the program, when funding ran out quickly and borrowers were not hearing back from their banks, industry sources told NBC News. Although businesses must certify they are only applying for one loan, some small-business owners applied at more than one bank to ensure they could secure a financial lifeline amid the economic shutdown.

Senior banking executives told NBC News the Small Business Administration’s system caught most of these duplicates, rejecting borrowers who already had a loan number.

However, a few did get through — especially if, for instance, borrowers used their Social Security number to apply to one bank and their Employer Identification Number for another.

The news that some borrowers are getting paid more than once is galling, but not surprising, to small business owners such as Pittsburgh drywall contractor Bill Martin, who has yet to receive a PPP loan he applied for in April, even after resubmitting his application form multiple times and exchanging dozens of emails with a senior vice president at his bank.

The news that some borrowers are getting paid more than once is galling, but not surprising, to small business owners who have been waiting months for their own PPP loan.

“The incompetency and the amount of people who don’t know what they’re doing and just hanging on and doing the bare minimum is at an-all time high,” said Martin, a 55-year-old Army veteran. “Everyone is just flying by the seat of their pants.” An SBA spokesperson told NBC News the agency would reach out to Martin.

Some banks, potentially in an attempt at speeding things along, also gave their borrowers a promissory note before receiving SBA loan authorization number, Bay News 9 reported in early May.

“I applied for funding at a local bank. Other than the initial email I did not hear back from them on status. So I applied to PayPal,” wrote one Reddit user, who claimed they ended up being funded by both banks. “Something is fubar with the SBA system.”

Later, the user said they contacted their local bank and were able to give that loan back and keep the loan from PayPal.

After funding ran out, some banks also suggested that customers who still had pending applications in their queue should apply with another bank in the meantime.

"Your application is still in Stage 1, with an extremely large volume of applications ahead of you,” read one such message from Chase. "You can decide if you would like to try applying with another lender."

There are an estimated 1,000 such loans for over a hundred million dollars, according to a Reuters report. That’s an error rate of about .00002 percent out of a total of almost 4.5 million loans to date, with the number dropping as the parties work to cancel the extra loans.

The SBA is sending banks lists of borrowers with duplicate PPP loans and, since the SBA will only guarantee one loan per borrower, banks are eager to cancel any extra loans. Banks are either canceling the loans themselves or asking customers which loan they want to keep. Borrowers, especially those applying for loan forgiveness, are also reaching out to cancel so that they are only responsible for one loan.

A Bank of America senior executive said the situation had not been an issue. Wells Fargo and Citibank declined to comment on the record. But JPMorgan Chase and three alternative lenders, PayPal, Square, and BlueVine, confirmed they were working with the SBA to resolve the problem.

“We have seen a small number of duplicate applications funded through the SBA Paycheck Protection Program, despite the administration’s guidance that applicants not apply more than once for a loan,” PayPal spokesperson Joseph Gallo said in a statement.

The overpayments are the latest ding for the $600 billion public program that has progressed in fits and starts since its rushed debut at the beginning of April.

“It is our impression that the majority of these borrowers are not bad actors but honest small business owners who had applied for a PPP loan through multiple lenders to increase their chances of getting a PPP loan quickly... after not hearing from their traditional bank for several days or even weeks,” Bluevine spokesperson Christina Cole told NBC News in an email.

The overpayments are the latest ding for the $600 billion public program that has progressed in fits and starts since its rushed debut at the beginning of April. Much of the early funding went to larger businesses before running out, leaving millions of small businesses out in the cold. Additional funding and guidance that restricted who should apply has since allowed the progam to continue assisting eligible small businesses.

Any borrower who managed to keep more than loan would still have to pay back the extra cash. Only one loan will be able to receive forgiveness. However, the Department of Justice has said it plans to investigate potential PPP fraud cases.